British bond yield curve hits flattest in a year

(Reuters) The difference between two-year and 10-year British government bond yields hit its lowest level in more than a year on Wednesday, part of a global trend of investors doubting inflation will be strong enough to push up interest rates much.

The yield spread between the two benchmark gilts narrowed to 75.9 basis points, its lowest level since early October 2016 and down around 4 bps on the day.

Analysts said the move was driven by similar moves in US and European markets rather than British economic news or a further hardening of bets that last week’s Bank of England rate hike will be a case of “one and done”.

“Curves internationally have also been flattening, particularly in the US. It’s generally demand for safe-haven bonds”

by Vatsala Datta, fixed income strategist at RBC

30-year gilts

Tuesday’s very strong demand for a new 30-year inflation-linked gilt at sale via syndication also helped to flatten the British yield curve, said Vatsala Datta, fixed income strategist at RBC.

“Curves internationally have also been flattening, particularly in the US. It’s generally demand for safe-haven bonds,” she said.

“In the US I think it’s driven by policy expectations, there’s no inflationary impetus domestically.”

Capital Com (UK) Limited is registered in England and Wales with company registration number 10506220. Authorised and regulated by the Financial Conduct Authority (FCA), under register number 793714.

Capital Com SV Investments Limited is a Cyprus Registered Company with Company Registration Number HE 354252. Authorised and regulated by the Cyprus Securities and Exchange Commission (CySEC), under license number 319/17.

The information found on this website isn’t applicable to residents of the USA or Belgium and shall not be used or distributed in any country or jurisdiction where it goes against domestic legislation and regulations.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 78% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.